Philippine shares are expected to trade cautiously in the coming weeks as the second-quarter earnings season begins, shifting investors’ focus from recent market gains to whether corporate profits can withstand persistent inflation, the prospect of further monetary tightening, and rising geopolitical risks.
Online brokerage 2TradeAsia said the market is likely to pause after the Philippine Stock Exchange index (PSEi) climbed 1.6 percent week on week to 6,286, buoyed by easing headline inflation, P3.62 billion in net foreign buying, and a 23 percent increase in trading turnover.
The brokerage, however, urged investors to identify selective earnings plays as average earnings per share are projected to decline by 2 percent, highlighting a more challenging backdrop for listed firms.
While June headline inflation slowed to 6.4 percent from 6.8 percent in May, 2TradeAsia said the acceleration in core inflation to a 31-month high of 4.4 percent points to broader price pressures that could keep the Bangko Sentral ng Pilipinas on its tightening path. Renewed geopolitical tensions that threaten to push global oil prices higher add another layer of uncertainty for companies and investors alike.
The combination of slowing earnings growth and expectations of higher borrowing costs suggests stock selection, rather than broad market exposure, may drive returns during the reporting season.
Against this backdrop, 2TradeAsia continues to favor banks for their resilient net interest margins despite the waiver of electronic fund transfer fees. It also sees energy companies as a hedge against potential oil price spikes, while conglomerates trading at 10 percent to 50 percent discounts to their net asset values could benefit as subsidiary earnings recover.
RCBC Chief Economist Michael Ricafort said the peso has remained relatively stable at around P61.60 to P61.70 against the US dollar, supported by possible market intervention and expectations of another BSP rate hike at its Aug. 27 policy meeting.
Ricafort said another increase in policy rates could help stabilize the peso, reduce imported inflation, and anchor inflation expectations. He identified resistance at P61.60 to P61.70, with the record P61.75 level as the next test, while support is seen at P61.10, P61.00, and P60.75 to P60.95 if market conditions improve.
